Aussie retreats as China import growth stops

Imports decline first time in two years

In data released today, China’s imports fell 7.6% y/y in December, the first monthly decline since October 2016. Exports also contracted but by a lesser degree, falling 4.4% y/y resulting in a wider trade surplus of $57.06 billion from $44.71 billion in November. AUD/USD declined following the data, dropping to an intra-day low of 0.7179.

AUD/USD Hourly Chart

Source: OANDA fxTrade

For the full year 2018, exports climbed 9.9% y/y, the highest since 2011,versus 7.9% in 2017 while import growth dipped marginally to +15.8% y/y from +15.9%. The overall trade surplus for the year narrowed to $351.8 billion, the lowest since 2013, from $422.5 billion. The surplus with the US painted a different picture. It gained 5.7% compared with a year previously, to hit $323.5 billion, the highest on record going back to 2006.

USD/Yuan fixed at lowest since July

The Peoples Bank of China set this morning’s USD/Yuan fix at 6.7560, the lowest since July 19, reflecting a broadly weaker US dollar on Friday. It’s worth noting that on Friday that a local press article suggested that the central bank was wary of any “sharp” yuan appreciation.

In its open market operations this morning, the PBOC injected 20 billion yuan in 28-day repos, the first liquidity injection in that tenor since June 2018. There is probably no policy implications in this move, it’s just to cover the Lunar New year period when cash demand is exceptionally high.

USD/CNH edged down to below 6.75 again, the second time in two sessions, though failed to take out Friday’s low of 6.7372, which was the lowest since July 19. USD/CNH is now at 6.7605.

USD/CNH Daily Chart

Source: OANDA fxTrade

Brexit debate to stir Europe?

The only event of note to occupy European traders will be the parliamentary debate on the Brexit deal prior to the vote tomorrow. Most analysts agree that the deal as it stands will no pass and confuse the already murky waters ahead of the final March deadline. The pound traded defensively in Asia, struggling to test the 100-day moving average at 1.2892 to trade at 1.2845.

The only data point scheduled is the release of Euro-zone industrial production for November. Given that the numbers for Germany, France and Spain have already come out on the weak side, assumptions are that the amalgamated number will follow suit. Forecasts suggest a contraction of 1.0% m/m and 1.4% y/y. These forecasts could prove to be optimistic.